SUFFOLK, Va., Jan. 27, 2022 (GLOBE NEWSWIRE) -- TowneBank (the "Company" or "Towne") (Nasdaq: TOWN) today reported financial results for the full year and the fourth quarter ended December 31, 2021. For the year ended December 31, 2021, earnings were $215.38 million, or $2.97 per diluted share, compared to $145.54 million, or $2.01 per diluted share for the year ended December 31, 2020. Earnings in the fourth quarter of 2021 were $40.18 million, or $0.55 per diluted share, compared to fourth quarter 2020 earnings of $50.08 million, or $0.69 per diluted share.

"We were pleased with our performance for 2021, highlighted by our 22nd year of increased earnings. We achieved record financial results with total revenues surpassing $680 million for the year, which illustrates the value of Towne’s diversified business model. Credit quality remained excellent and strong deposit growth across all markets was a bright spot for the year, leading the way for TowneBank to maintain the #1 market share position for our home market in Hampton Roads. These accomplishments were the result of the hard work and dedication from our nearly 2,900 team members who embrace and define our culture of caring each day," said G. Robert Aston, Jr., Executive Chairman.

Annual Highlights for 2021 Compared to 2020:

  • Total revenues were $680.33 million for the year ended December 31, 2021, an increase from the prior year of $16.00 million, or 2.41%. Increases in net interest income of $22.23 million were partially offset by a $6.23 million decline in noninterest income. The decrease in noninterest income was driven by a decline in residential mortgage banking income of $2.86 million and an $8.38 million decline in gain on investment securities. Property management income increased by $15.70 million, year-over-year.   A 2020 nonrecurring gain on the sale of Red Sky Insurance totaling $17.63 million also contributed to the comparative decline.
  • Pre-provision, pre-tax, net revenues (non-GAAP) were $253.41, an increase of $8.80 million, or 3.60%.
  • Loans held for investment declined $0.12 billion, or 1.28% from December 31, 2020. The balances at December 31, 2021 and 2020 included $0.16 billion and $0.86 billion, respectively, of loans originated under the Paycheck Protection Program ("PPP"). Excluding PPP loans, loans held for investment increased $0.58 billion, or 6.56%, compared to prior year.
  • Total deposits were $13.57 billion, an increase of $2.0 billion, or 17.29% compared to prior year.
  • Book value per share was $26.13, an increase of 7.47% over prior year.   Tangible book value (non-GAAP) per share was $19.15, compared to $17.46 in 2020, an increase of 9.65%.
  • Return on average assets was 1.40% in 2021, compared to 1.03% in the prior year. Return on average tangible assets (non-GAAP) increased 33.23% to 1.51% in 2021.
  • Return on average common shareholders' equity was 11.70% and return on average tangible common shareholders' equity was 16.75% (non-GAAP).
  • Taxable equivalent net interest margin of 2.86% (non-GAAP) compared to 3.18% in the prior year.
  • Effective tax rate of 20.28% compared to 17.98% in 2020.

Highlights for Fourth Quarter 2021 Compared to Fourth Quarter 2020:

  • Total revenues were $160.42 million, in fourth quarter 2021, a decrease from the prior year quarter of $11.42 million, or 6.65%.   Increases in insurance and property management income were more than offset by a $16.56 million decrease in residential mortgage banking income as mortgage demand continued to normalize after the interest rate driven surge in 2020.
  • Pre-provision, pre-tax, net revenues (non-GAAP) were $48.48 million, a decrease of $13.62 million, or 21.93%.
  • Loans held for investment increased $0.21 billion, or 2.24%, in fourth quarter 2021. Excluding PPP loans, loans held for investment increased $0.30 billion, or 13.26% on an annualized basis, from the linked quarter.
  • Total deposits were $13.57 billion, an increase of $0.56 billion, or 4.30%, from September 30, 2021, or 17.06% on an annualized basis.
  • Noninterest bearing deposits increased by 26.79%, to $5.55 billion, compared to prior year, representing 40.86% of total deposits. Compared to the linked quarter, noninterest bearing deposits increased 11.16% on an annualized basis.
  • In the quarter ended December 31, 2021, annualized return on average common shareholders' equity was 8.45% and annualized return on average tangible common shareholders' equity was 12.22% (non-GAAP). For the full 12 months, return on average common shareholders' equity was 11.70% and return on average tangible common shareholders' equity was 16.75% (non-GAAP).
  • Net interest margin of 2.70% and taxable equivalent net interest margin of 2.72% (non-GAAP) compared to the prior year quarter of 2.97% and 2.98%, respectively.
  • Effective tax rate of 18.97% compared to 17.21% in fourth quarter 2020 and 22.73% in the linked quarter.

"From a strategic perspective, we were encouraged to see loan growth momentum build in the back half of 2021. We have several new banking locations coming fully online in 2022 and expect to continue expanding our impressive suite of noninterest income sources. We are well-positioned to deploy our excess liquidity and should benefit in a rising rate environment," said J. Morgan Davis, Chief Executive Officer.

Quarterly Net Interest Income Compared to the Fourth Quarter of 2020:

  • Net interest income was $100.79 million compared to $100.61 million for the quarter ended December 31, 2020.
  • Taxable equivalent net interest margin (non-GAAP) was 2.72%, including purchase accounting accretion of 2 basis points and PPP accretion of 7 basis points, compared to 2.98%, including purchase accounting accretion of 5 basis points and PPP accretion of 10 basis points, for fourth quarter 2020.
  • On an average basis, loans held for investment, with a yield of 4.05%, represented 63.26% of earning assets in the fourth quarter of 2021 compared to a yield of 4.28%, which represented 72.32% of earning assets in the fourth quarter of 2020.
  • Interest and fee income on PPP loans was $3.85 million in fourth quarter 2021, compared to $7.77 million in the linked quarter, and $11.29 million in fourth quarter 2020.
  • Total cost of deposits decreased to 0.16% from 0.37% at December 31, 2020.
  • Average interest-earning assets totaled $14.80 billion at December 31, 2021 compared to $13.48 billion at December 31, 2020, an increase of 9.78%.
  • Average interest-bearing liabilities totaled $8.26 billion, an increase of $0.23 billion, or 2.88%, from the prior year.
  • We expect to continue positioning our earning asset portfolio to positively benefit interest margin in anticipation of a rising rate environment.

Quarterly Provision for Credit Losses:

  • The quarterly provision for credit losses for on-balance-sheet loans was a benefit of $1.18 million compared to a provision expense of $1.21 million one year ago and a benefit of $1.60 million in the linked quarter.
  • The fourth quarter 2021 included a release in the allowance for credit losses of $1.12 million that was driven by a combination of net recoveries and improvement in the current economic forecast, offset by core loan growth.
  • Net recoveries were $0.06 million compared to net charge-offs of $0.11 million one year prior. The ratio of net charge-offs (recoveries) to average loans on an annualized basis was 0.00% in fourth quarter 2021 and 2020, and (0.03)% in the linked quarter.
  • The allowance for credit losses on loans represented 1.12% of total loans compared to 1.15% at September 30, 2021 and 1.25% at December 31, 2020. Excluding PPP loans, which are fully government guaranteed, the allowance for credit losses on loans (non-GAAP) was 1.13% at December 31, 2021, 1.18% at September 30, 2021, and 1.37% at December 31, 2020. The allowance for credit losses on loans was 17.76 times nonperforming loans compared to 12.68 times at September 30, 2021 and 10.74 times at December 31, 2020.
  • Expected loss estimates are subject to change based on continuing review of models and assumptions, portfolio performance, changes in forecasted macroeconomic conditions and loan mix, which could result in material changes to the reserve in future periods.

Quarterly Noninterest Income Compared to Fourth Quarter 2020:

  • Total noninterest income was $59.63 million compared to $71.23 million in 2020, a decrease of $11.60 million, or 16.29%. Residential mortgage banking income decreased $16.56 million, while insurance commissions increased $1.62 million, and property management income increased $3.43 million.
  • Residential mortgage banking income was $20.95 million compared to $37.50 million in fourth quarter 2020. Loan volume in the current quarter was $1.15 billion, with purchase activity comprising 79.36%. Loan volume in fourth quarter 2020 was $1.69 billion, with purchase activity of 59.76%. Loan volume in the linked quarter was $1.31 billion with purchase activity of 77.45%.   Mortgage rates have increased compared to prior periods, resulting in a decline in refinance activity.
  • In addition to declines in mortgage volume and margin from prior periods, the income statement impact of derivative instruments in the fourth quarter of 2021 was a net loss of $2.90 million, compared to a net gain of $1.30 million in the fourth quarter of 2020, and a net loss of $0.77 million in the linked quarter.  
  • Total insurance segment revenue increased $2.26 million, or 13.31%, to $19.26 million in the fourth quarter of 2021. This increase is attributable to higher property and casualty commissions and contingency income, compared to the prior year quarter. We acquired an insurance agency in December 2020, which brought in $0.53 million in additional revenue in fourth quarter 2021.
  • Property management fee revenue increased 60.62%, or $3.43 million, as compared to fourth quarter 2020 due to strong fourth quarter 2021 reservation activity. In July 2021, the Company acquired Venture Resorts, a cabin rental company in the Smoky Mountains of Tennessee, which brought in an additional $2.02 million in property management fees in the quarter.

Quarterly Noninterest Expense Compared to Fourth Quarter 2020:

  • Total noninterest expense was $110.47 million compared to $105.93 million, an increase of $4.54 million, or 4.28%. This reflects increases of $3.34 million in salary and benefits expense, $1.16 million in data processing expense, and $1.21 million in advertising and marketing expenses. The Venture Resorts acquisition resulted in an additional $3.72 million of noninterest expenses during the quarter.
  • Increases in salaries and benefits compared to fourth quarter 2020 were driven by second quarter 2021 annual base salary adjustments, business acquisitions, and year-end production-related bonuses.
  • Higher credit card fees on vacation property reservation activities and increased costs associated with our core banking platform drove the increase in data processing expense.
  • Advertising and marketing expenses increased, primarily in our Realty segment, driven by production based advertising programs in our property management companies and a consumer mortgage advertising program in our residential mortgage operations.
  • We expect first quarter 2022 noninterest expenses to be slightly lower than the current quarter and average $107 million to $109 million on a quarterly basis throughout 2022.

Consolidated Balance Sheet Highlights:

  • Total assets were $16.36 billion at December 31, 2021, an increase of 11.86%, compared to $14.63 billion at December 31, 2020. The increase was driven by increased liquidity levels related to strong deposit growth.
  • Loans held for investment decreased $0.12 billion, or 1.28%, compared to year end 2020, but increased $0.21 billion compared to the linked quarter. Excluding PPP loans of $0.16 billion in fourth quarter 2021, $0.86 billion in fourth quarter 2020, and $0.25 billion in the linked quarter, loans held for investment increased $0.58 million, or 6.56%, compared to prior year, and $0.30 million, or 2.24%, compared to September 30, 2021, or 13.26% on an annualized basis.
  • Average loans held for investment, excluding PPP loans, were $9.17 billion in fourth quarter 2021, an increase of $444.58 million, or 5.09%, compared to prior year. In the linked quarter comparison, average loans held for investment, excluding PPP loans, increased 3.16%, or $280.75 million, 12.53% on an annualized basis.
  • Unamortized fee income related to PPP loans was $4.16 million at December 31, 2021 and $14.79 million at December 31, 2020.
  • Mortgage loans held for sale decreased $0.18 billion, or 33.75%, compared to prior year and $0.07 billion, or 17.03%, compared to the linked quarter.
  • Total deposits increased $2.0 billion, or 17.29%, over December 31, 2020, and increased $0.56 billion, or 4.30%, compared to the linked quarter.
  • Total borrowings decreased $0.47 billion, or 49.59%, from prior year and $0.01 billion, or 1.16%, compared to the linked quarter.

Investment Securities:

  • Total investment securities were $1.98 billion compared to $1.59 billion at September 30, 2021 and $1.42 billion at December 31, 2020. The weighted average duration of the portfolio at December 31, 2021 was 3.89 years. The carrying value of the AFS debt securities portfolio included $17.54 million in net unrealized gains compared to $58.32 million in net unrealized gains at December 31, 2020.
  • We anticipate continuing to strategically deploy excess liquidity at a similar pace in the first half of 2022.

Loans and Asset Quality:

  • Total loans held for investment were $9.51 billion at December 31, 2021 compared to $9.30 billion at September 30, 2021 and $9.63 billion at December 31, 2020.
  • Nonperforming assets were $10.56 million, or 0.06% of total assets, compared to $16.21 million, or 0.11% of total assets, at December 31, 2020.
  • Nonperforming loans were 0.06% of period end loans compared to 0.12% at December 31, 2020.
  • Foreclosed property increased $0.30 million from $4.28 million at December 31, 2020.   On January 14, 2022, the Company recognized a nominal gain on the sale of a foreclosed property, which had been carried on the balance sheet at $3.55 million at December 31, 2021.

Deposits and Borrowings:

  • Total deposits were $13.57 billion compared to $13.01 billion at September 30, 2021 and $11.57 billion at December 31, 2020.
  • Total loans held for investment to total deposits were 70.03% compared to 71.44% at September 30, 2021 and 83.20% at December 31, 2020.
  • Non-interest bearing deposits were 40.86% of total deposits at December 31, 2021 compared to 41.45% at September 30, 2021 and 37.80% at December 31, 2020. Non-interest bearing deposits experienced typical seasonality during the fourth quarter.
  • Total borrowings were $0.48 billion compared to $0.49 billion and $0.96 billion at September 30, 2021 and December 31, 2020, respectively.

Capital:

  • Common equity tier 1 capital ratio of 12.36%.
  • Tier 1 leverage capital ratio of 9.12%.
  • Tier 1 risk-based capital ratio of 12.50%.
  • Total risk-based capital ratio of 15.56%.
  • Book value per share was $26.13 compared to $25.91 at September 30, 2021 and $24.31 at December 31, 2020.
  • Tangible book value per share (non-GAAP) was $19.15 compared to $18.92 at September 30, 2021 and $17.46 at December 31, 2020.

Annual Meeting of Shareholders:
TowneBank intends to hold its 2022 Annual Meeting of Shareholders at 11:30 a.m. on Wednesday, May 25, 2022 at the Virginia Beach Convention Center, 1000 19th Street in Virginia Beach, Virginia.

About TowneBank:
Founded in 1999, TowneBank is a company built on relationships, offering a full range of banking and other financial services, with a mission of serving others and enriching lives. Dedicated to a culture of caring, Towne values all employees and members by embracing their diverse talents, perspectives, and experiences.

Today, TowneBank operates over 40 banking offices throughout Hampton Roads and Central Virginia, as well as Northeastern and Central North Carolina – serving as a local leader in promoting the social, cultural, and economic growth in each community. Towne offers a competitive array of business and personal banking solutions, delivered with only the highest ethical standards. Experienced local bankers providing a higher level of expertise and personal attention with local decision-making are key to the TowneBank strategy. TowneBank has grown its capabilities beyond banking to provide expertise through its controlled divisions and subsidiaries that include Towne Investment Group, Towne Wealth Management, Towne Insurance Agency, Towne Benefits, TowneBank Mortgage, TowneBank Commercial Mortgage, Berkshire Hathaway HomeServices Towne Realty, Towne 1031 Exchange, LLC, and Towne Vacations. With total assets of $16.36 billion as of December 31, 2021, TowneBank is one of the largest banks headquartered in Virginia.

Non-GAAP Financial Measures:

This press release contains certain financial measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Such non-GAAP financial measures include the following: fully tax-equivalent net interest margin, tangible book value per common share, total risk-based capital ratio, tier one leverage ratio, tier one capital ratio, and the tangible common equity to tangible assets ratio. Management uses these non-GAAP financial measures to assess the performance of TowneBank’s core business and the strength of its capital position. Management believes that these non-GAAP financial measures provide meaningful additional information about TowneBank to assist investors in evaluating operating results, financial strength, and capitalization. The non-GAAP financial measures should be considered as additional views of the way our financial measures are affected by significant charges for credit costs and other factors. These non-GAAP financial measures should not be considered as a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. The computations of the non-GAAP financial measures used in this presentation are referenced in a footnote or in the appendix to this presentation.

Forward-Looking Statements:
This press release contains certain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts, but instead represent only the beliefs, expectations, or opinions of TowneBank and its management regarding future events, many of which, by their nature, are inherently uncertain. Forward-looking statements may be identified by the use of such words as: "believe," "expect," "anticipate," "intend," "plan," "estimate," or words of similar meaning, or future or conditional terms, such as "will," "would," "should," "could," "may," "likely," "probably," or "possibly." These statements may address issues that involve significant risks, uncertainties, estimates, and assumptions made by management. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include the impacts of the ongoing COVID-19 pandemic and the associated efforts to limit the spread of the virus; competitive pressures in the banking industry that may increase significantly; changes in the interest rate environment that may reduce margins and/or the volumes and values of loans made or held as well as the value of other financial assets held; changes in the credit worthiness of customers and the possible impairment of the collectability of loans; general economic conditions, either nationally or regionally, that may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit or other services; changes in the legislative or regulatory environment, including changes in accounting standards and tax laws, that may adversely affect our business; costs or difficulties related to the integration of the businesses we have acquired may be greater than expected; expected cost savings associated with pending or recently completed acquisitions may not be fully realized or realized within the expected time frame; cybersecurity threats or attacks, the implementation of new technologies, and the ability to develop and maintain reliable electronic systems; our competitors may have greater financial resources and develop products that enable them to compete more successfully; changes in business conditions; changes in the securities market; and changes in our local economy with regard to our market area. Any forward-looking statements made by us or on our behalf speak only as of the date they are made or as of the date indicated, and we do not undertake any obligation to update forward-looking statements as a result of new information, future events, or otherwise. For additional information on factors that could materially influence forward-looking statements included in this release, see the "Risk Factors" in TowneBank’s Annual Report on Form 10-K for the year ended December 31, 2020 and related disclosures in other filings that have been, or will be, filed by TowneBank with the Federal Deposit Insurance Corporation.

Media contact:
G. Robert Aston, Jr., Executive Chairman, 757-638-6780
J. Morgan Davis, Chief Executive Officer, 757-673-1673

Investor contact:
William B. Littreal, Chief Financial Officer, 757-638-6813

TOWNEBANK
Selected Financial Highlights (unaudited)
(dollars in thousands, except per share data)
   
  Three Months Ended
  December 31, September 30, June 30, March 31, December 31,
  2021   2021   2021   2021   2020 
Income and Performance Ratios:         
 Total revenue, net of interest expense$160,424  $170,076  $167,321  $182,509  $171,848 
 Net income 41,657   52,743   58,002   72,631   53,891 
 Net income available to common shareholders 40,183   50,400   55,803   68,995   50,082 
 Pre-provision, pre-tax, net revenues (non-GAAP) 48,483   63,647   59,728   81,578   62,107 
 Net income per common share - diluted 0.55   0.69   0.77   0.95   0.69 
 Book value per common share 26.13   25.91   25.51   24.78   24.31 
 Book value per share - tangible (non-GAAP) 19.15   18.92   18.70   17.94   17.46 
 Return on average assets 0.99%  1.27%  1.48%  1.92%  1.35%
 Return on average assets - tangible (non-GAAP) 1.08%  1.37%  1.59%  2.05%  1.46%
 Return on average equity 8.38%  10.59%  12.21%  15.56%  11.26%
 Return on average equity - tangible (non-GAAP) 12.08%  15.09%  17.38%  22.19%  16.28%
 Return on average common equity 8.45%  10.68%  12.31%  15.70%  11.36%
 Return on average common equity - tangible (non-GAAP) 12.22%  15.27%  17.57%  22.45%  16.48%
 Noninterest income as a percentage of total revenue 37.17%  40.94%  39.55%  45.21%  41.45%
Regulatory Capital Ratios (1):         
 Common equity tier 1 12.36%  12.53%  12.42%  12.15%  11.87%
 Tier 1 12.50%  12.69%  12.57%  12.30%  12.04%
 Total 15.56%  15.85%  15.76%  15.59%  15.42%
 Tier 1 leverage ratio 9.12%  9.18%  9.44%  9.54%  8.99%
Asset Quality:         
 Allowance for credit losses on loans to nonperforming loans 17.76x   12.68x   9.67x   9.09x   10.74x 
 Allowance for credit losses on loans to period end loans 1.12%  1.15%  1.15%  1.19%  1.25%
 Allowance for credit losses on loans to period end loans excluding PPP loans (non-GAAP) 1.13%  1.18%  1.22%  1.31%  1.37%
 Nonperforming loans to period end loans 0.06%  0.09%  0.12%  0.13%  0.12%
 Nonperforming assets to period end assets 0.06%  0.09%  0.10%  0.11%  0.11%
 Net charge-offs (recoveries) to average loans (annualized) —%  (0.03)%       (0.01)%  0.03%  —%
 Net charge-offs (recoveries) (60)  (644)  (137)  669   109 
           
 Nonperforming loans$5,973  $8,451  $11,178  $12,768  $11,188 
 Former bank premises —   —   —   750   750 
 Foreclosed property 4,583   5,409   4,041   3,748   4,276 
 Total nonperforming assets$10,556  $13,860  $15,219  $17,266  $16,214 
 Loans past due 90 days and still accruing interest$372  $143  $1,584  $108  $528 
 Allowance for credit losses on loans 106,059   107,177   108,130   116,077   120,157 
Mortgage Banking:         
 Loans originated, mortgage$851,021  $939,272  $1,050,663  $1,187,595  $1,257,963 
 Loans originated, joint venture 303,362   370,865   403,864   417,177   429,848 
 Total loans originated$1,154,383  $1,310,137  $1,454,527  $1,604,772  $1,687,811 
 Number of loans originated 3,408   3,917   4,514   5,164   5,481 
 Number of originators 213   219   222   229   228 
 Purchase % 79.36%  77.45%  76.95%  53.45%  59.76%
 Loans sold$1,150,996  $1,394,166  $1,485,057  $1,601,480  $1,845,926 
 Rate lock asset$3,455  $6,087  $7,760  $12,522  $11,781 
 Gross realized gain on sales and fees as a % of loans originated 3.42%  3.61%  3.64%  4.01%  4.02%
Other Ratios:         
 Net interest margin 2.70%  2.76%  2.92%  3.04%  2.97%
 Net interest margin-fully tax equivalent (non-GAAP) 2.72%  2.78%  2.94%  3.06%  2.98%
 Average earning assets/total average assets 92.08%  91.89%  91.89%  91.46%  91.59%
 Average loans/average deposits 70.68%  71.69%  78.22%  82.71%  83.42%
 Average noninterest deposits/total average deposits 41.42%  40.40%  40.21%  38.39%  39.61%
 Period end equity/period end total assets 11.71%‍1 12.02%  11.83%  12.04%  12.20%
 Efficiency ratio (non-GAAP) 67.03%  59.58%  61.46%  52.11%  60.02%
 (1) Current reporting period regulatory capital ratios are preliminary.      


TOWNEBANK
Selected Data (unaudited)
(dollars in thousands)
 
           
 Investment Securities      % Change
  Q4 Q4 Q3 Q4 21 vs. Q4 21 vs.
 Available-for-sale securities, at fair value 2021   2020   2021  Q4 20 Q3 21
 U.S. agency securities$310,587  $184,657  $207,949   68.20%  49.36%
 U.S. Treasury notes 1,000   1,000   1,007   —%  (0.70)%
 Municipal securities 385,673   353,651   350,980   9.05%  9.88%
 Trust preferred and other corporate securities 53,950   31,499   31,591   71.28%  70.78%
 Mortgage-backed securities issued by GSE and GNMA 1,055,183   797,765   969,017   32.27%  8.89%
 Allowance for credit losses (210)  (348)  (142)  (39.66)%  47.89%
 Total$1,806,183  $1,368,224  $1,560,402   32.01%  15.75%
 Gross unrealized gains (losses) reflected in financial statements         
 Total gross unrealized gains$32,054  $60,025  $40,906   (46.60)%  (21.64)%
 Total gross unrealized losses (14,514)  (1,703)  (8,845)  752.26%  64.09%
 Net unrealized gain (loss) on AFS securities$17,540  $58,322  $32,061   (69.93)%  (45.29)%
           
 Held-to-maturity securities, at amortized cost         
 U.S. agency securities$73,360  $—  $—   100.00%  100.00%
 U.S. Treasury notes 66,326   —   —   100.00%  100.00%
 Municipal securities 5,095   5,012   2,285   1.66%  122.98%
 Trust preferred corporate securities 2,272   2,321   5,074   (2.11)%  (55.22)%
 Mortgage-backed securities issued by GSE and GNMA 7,168   9,179   7,539   (21.91)%  (4.92)%
 Allowance for credit losses (94)  (97)  (94)  (3.09)%  —%
 Total$154,127  $16,415  $14,804   838.94%  941.12%
Gross unrealized gains (losses) not reflected in financial statements        
 Total gross unrealized gains$1,561  $1,957  $1,591   (20.24)%  (1.89)%
 Total gross unrealized losses (106)  —   —  n/m n/m
 Net unrealized gain (loss) on HTM securities$1,455  $1,957  $1,591   (25.65)%  (8.55)%
           
 Loans Held For Investment (1)      % Change
  Q4 Q4 Q3 Q4 21 vs. Q4 21 vs.
   2021   2020   2021  Q4 20 Q3 21
 Real estate - construction and development$1,125,863  $1,199,772  $1,005,592   (6.16)%  11.96%
 Commercial real estate - owner occupied 1,494,000   1,380,516   1,463,000   8.22%  2.12%
 Commercial real estate - non owner occupied 2,620,334   2,335,235   2,647,625   12.21%  (1.03)%
 Multifamily 332,659   295,488   363,733   12.58%  (8.54)%
 Residential 1-4 family 1,305,915   1,216,629   1,233,125   7.34%  5.90%
 HELOC 380,834   412,476   389,974   (7.67)%  (2.34)%
 Commercial and industrial business (C&I) 1,206,911   1,990,808   1,253,972   (39.38)%  (3.75)%
 Government 525,358   379,243   471,037   38.53%  11.53%
 Indirect 394,802   271,459   348,864   45.44%  13.17%
 Consumer loans and other 119,576   147,442   120,643   (18.90)%  (0.88)%
 Total$9,506,252  $9,629,068  $9,297,565   (1.28)%  2.24%
(1) PPP loans totaling $0.16 billion, $0.86 billion and $0.25 billion, primarily in C&I, are included in Q4 2021, Q4 2020 and Q3 2021, respectively.
           
 Deposits      % Change
  Q4 Q4 Q3 Q4 21 vs. Q4 21 vs.
   2021   2020   2021  Q4 20 Q3 21
 Noninterest-bearing demand$5,546,665  $4,374,566  $5,394,952   26.79%  2.81%
 Interest-bearing:         
 Demand and money market accounts 6,139,714   4,819,604   5,681,181   27.39%  8.07%
 Savings 371,356   330,091   366,165   12.50%  1.42%
 Certificates of deposits 1,515,891   2,048,905   1,571,752   (26.01)%  (3.55)%
 Total$13,573,626  $11,573,166  $13,014,050   17.29%  4.30%
           


TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
 Three Months Ended Three Months Ended Three Months Ended
 December 31, 2021 September 30, 2021 December 31, 2020
   Interest Average   Interest Average   Interest Average
 Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
 Balance Expense Rate Balance Expense Rate Balance Expense Rate
Assets:                 
Loans (net of unearned income
and deferred costs), excluding
nonaccrual loans (1)		$9,364,498  $95,696  4.05% $9,238,922  $98,732  4.24% $9,752,150  $104,799  4.28%
Taxable investment securities 1,625,683   10,217  2.51%  1,421,347   6,560  1.85%  1,250,375   6,878  2.20%
Tax-exempt investment securities 157,855   292  0.74%  125,523   487  1.55%  139,572   520  1.49%
Total securities 1,783,538   10,509  2.36%  1,546,870   7,047  1.82%  1,389,947   7,398  2.13%
Interest-bearing deposits 3,274,392   1,215  0.15%  3,179,010   1,182  0.15%  1,754,365   435  0.10%
Loans held for sale 379,808   2,750  2.90%  468,323   3,406  2.91%  587,517   3,867  2.63%
Total earning assets 14,802,236   110,170  2.95%  14,433,125   110,367  3.03%  13,483,979   116,499  3.44%
Less: allowance for credit losses (107,215)      (108,478)      (121,402)    
Total nonearning assets 1,380,488       1,382,351       1,359,808     
Total assets$16,075,509      $15,706,998      $14,722,385     
Liabilities and Equity:                 
Interest-bearing deposits                 
Demand and money market$5,853,873  $2,148  0.15% $5,486,788  $2,095  0.15% $4,582,588  $2,633  0.23%
Savings 371,901   534  0.57%  358,739   533  0.59%  317,561   552  0.69%
Certificates of deposit 1,541,483   2,707  0.70%  1,842,948   3,400  0.73%  2,159,573   7,578  1.40%
Total interest-bearing deposits 7,767,257   5,389  0.28%  7,688,475   6,028  0.31%  7,059,722   10,763  0.61%
Borrowings 245,622   360  0.58%  300,505   412  0.54%  722,291   1,645  0.89%
Subordinated debt, net 249,555   2,962  4.75%  249,405   2,962  4.75%  248,965   2,962  4.76%
Total interest-bearing liabilities 8,262,434   8,711  0.42%  8,238,385   9,402  0.45%  8,030,978   15,370  0.76%
Demand deposits 5,492,894       5,212,271       4,630,665     
Other noninterest-bearing liabilities 417,707       367,891       291,836     
Total liabilities 14,173,035       13,818,547       12,953,479     
Shareholders’ equity 1,902,474       1,888,451       1,768,906     
Total liabilities and equity$16,075,509      $15,706,998      $14,722,385     
Net interest income (tax-equivalent basis) (4)  $101,459      $100,965      $101,129   
Reconciliation of Non-GAAP Financial Measures                
Tax-equivalent basis adjustment   (667)      (522)      (515)  
Net interest income (GAAP)  $100,792      $100,443      $100,614   
Interest rate spread (2)(3)    2.53%     2.58%     2.68%
Interest expense as a percent of average earning assets   0.23%     0.26%     0.45%
Net interest margin (tax equivalent basis) (3)(4)   2.72%     2.78%     2.98%
Total cost of deposits    0.16%     0.19%     0.37%
                  

(1) December 31, 2021, December 31, 2020, and September 30, 2021 balances include average PPP balances of $0.20 billion, $1.04 billion, and $0.36 billion, and related interest and fee income of $3.85 million, $11.29 million, and $7.77 million, respectively. There were no PPP balances at December 31, 2019.
(2) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(3) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.
(4) Non-GAAP.


TOWNEBANK
Average Balances, Yields and Rate Paid (unaudited)
(dollars in thousands)
 
 Year Ended December 31,
  2021   2020   2019 
   Interest Average   Interest Average   Interest Average
 Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
 Balance Expense Rate Balance Expense Rate Balance Expense Rate
Assets:                 
Loans (net of unearned income
and deferred costs), excluding
nonaccrual loans (1)		$9,462,448  $397,877  4.20% $9,420,584  $411,421  4.37% $8,122,210  $405,511  4.99%
Taxable investment securities 1,426,493   29,857  2.09%  1,252,926   30,181  2.41%  1,202,107   34,141  2.84%
Tax-exempt investment securities 137,848   1,755  1.27%  140,078   2,997  2.14%  102,731   3,426  3.34%
Total securities 1,564,341   31,612  2.02%  1,393,004   33,178  2.38%  1,304,838   37,567  2.88%
Interest-bearing deposits 2,640,191   3,432  0.13%  689,715   2,603  0.38%  665,903   13,825  2.08%
Mortgage loans held for sale 471,767   13,227  2.80%  505,502   15,252  3.02%  335,588   13,379  3.99%
Total earning assets 14,138,747   446,148  3.16%  12,008,805   462,454  3.85%  10,428,539   470,282  4.51%
Less: allowance for credit losses (113,113)      (85,570)      (54,476)    
Total nonearning assets 1,359,028       2,248,971       1,264,363     
Total assets$15,384,662      $14,172,206      $11,638,426     
Liabilities and Equity:                 
Interest-bearing deposits                 
Demand and money market$5,359,321  $8,323  0.16% $4,070,562  $13,105  0.32% $3,351,135  $26,909  0.80%
Savings 352,333   2,117  0.60%  297,441   2,254  0.76%  280,894   3,296  1.17%
Certificates of deposit 1,788,985   16,669  0.93%  2,378,281   42,502  1.79%  2,478,663   56,050  2.26%
Total interest-bearing deposits 7,500,639   27,109  0.36%  6,746,284   57,861  0.86%  6,110,692   86,255  1.41%
Borrowings 395,045   2,159  0.54%  1,269,064   10,306  0.80%  609,142   11,368  1.84%
Subordinated debt, net 249,335   11,816  4.74%  248,736   11,847  4.76%  248,139   11,847  4.77%
Total interest-bearing liabilities 8,145,019   41,084  0.50%  8,264,084   80,014  0.97%  6,967,973   109,470  1.57%
Demand deposits 5,034,851       3,924,797       2,844,178     
Other noninterest-bearing liabilities 348,844       262,266       228,994     
Total liabilities 13,528,714       12,451,147       10,041,145     
Shareholders' equity 1,855,948       1,721,059       1,597,281     
Total liabilities and equity$15,384,662      $14,172,206      $11,638,426     
Net interest income (tax-equivalent basis) (4) $405,064      $382,440      $360,812   
Reconciliation of Non-GAAP Financial Measures                
Tax-equivalent basis adjustment  (2,695)      (2,296)      (2,457)  
Net interest income (GAAP) $402,369      $380,144      $358,355   
Interest rate spread (2)(4)   2.65%     2.88%     2.94%
Interest expense as a percent of average earning assets   0.29%     0.67%     1.05%
Net interest margin (tax-equivalent basis) (3)(4)   2.86%     3.18%     3.46%
Total cost of deposits   0.22%     0.54%     0.96%
                  

(1) December 31, 2021 and December 31, 2020 balances include average PPP balances of $0.53 billion and $0.74 billion and related interest and fee income of $33.27 million and $26.94 million, respectively There were no PPP balances at December 31, 2019.
(2) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. Fully tax equivalent.
(3) Net interest margin is net interest income expressed as a percentage of average earning assets. Fully tax equivalent.
(4) Non-GAAP.


TOWNEBANK
Consolidated Balance Sheets
(dollars in thousands, except per share data)
    
  2021   2020 
 (unaudited) (audited)
ASSETS   
Cash and due from banks$17,373  $41,514 
Interest-bearing deposits at FRB - Richmond 3,244,484   1,795,241 
Interest-bearing deposits in financial institutions 34,779   27,532 
Total Cash and Cash Equivalents 3,296,636   1,864,287 
Securities available for sale, at fair value (amortized cost of $1,788,853 and $1,310,250, and allowance for credit losses of $210 and $348 at December 31, 2021 and December 31, 2020, respectively. 1,806,183   1,368,224 
Securities held to maturity, at amortized cost (fair value $155,676 and $18,469 at December 31, 2021 and December 31, 2020, respectively. 154,221   16,512 
Less: allowance for credit losses (94)  (97)
Securities held to maturity, net of allowance for credit losses 154,127   16,415 
Other equity securities 6,759   6,492 
FHLB stock 13,146   30,135 
Total Securities 1,980,215   1,421,266 
Mortgage loans held for sale 358,303   540,798 
Loans, net of unearned income and deferred costs 9,506,252   9,629,068 
Less: allowance for credit losses (106,059)  (120,157)
Net Loans 9,400,193   9,508,911 
Premises and equipment, net 270,772   260,242 
Goodwill 457,187   452,328 
Other intangible assets, net 50,379   45,533 
BOLI 251,805   246,109 
Other assets 295,897   286,970 
     TOTAL ASSETS$16,361,387  $14,626,444 
LIABILITIES AND EQUITY   
Deposits:   
Noninterest-bearing demand$5,546,665  $4,374,566 
Interest-bearing:   
Demand and money market accounts 6,139,714   4,819,604 
Savings 371,356   330,091 
Certificates of deposit 1,515,891   2,048,905 
Total Deposits 13,573,626   11,573,166 
Advances from the FHLB 155,367   456,038 
Subordinated debt, net 249,652   249,055 
FRB PPP Lending Facility —   182,852 
Repurchase agreements and other borrowings 76,797   67,786 
Total Borrowings 481,816   955,731 
Other liabilities 389,771   313,719 
     TOTAL LIABILITIES 14,445,213   12,842,616 
Preferred stock   
Authorized and unissued shares - 2,000,000 —   — 
Common stock, $1.667 par: Authorized shares - 150,000,000   
Issued and outstanding shares 72,683,985 in 2021 and 72,667,541 in 2020 121,164   121,132 
Capital surplus 1,050,948   1,046,642 
Retained earnings 716,605   557,889 
Common stock issued to deferred compensation trust, at cost   
911,458 shares in 2021 and 873,486 shares in 2020 (18,257)  (16,969)
Deferred compensation trust 18,257   16,969 
Accumulated other comprehensive income (loss) 10,597   41,184 
     TOTAL SHAREHOLDERS’ EQUITY 1,899,314   1,766,847 
Noncontrolling interest 16,860   16,981 
     TOTAL EQUITY 1,916,174   1,783,828 
TOTAL LIABILITIES AND EQUITY$16,361,387  $14,626,444 
        

     

TOWNEBANK
Consolidated Statements of Income
(dollars in thousands, except per share data)
   
 Three Months Ended Twelve Months Ended
 December 31, December 31,
  2021   2020   2021   2020 
 (unaudited) (unaudited) (unaudited) (audited)
INTEREST INCOME:       
Loans, including fees$95,054  $104,182  $395,322  $409,252 
Investment securities 10,484   7,499   31,472   33,052 
Interest-bearing deposits in financial institutions and federal funds sold 1,215   435   3,432   2,603 
Mortgage loans held for sale 2,750   3,867   13,227   15,252 
Total interest income 109,503   115,983   443,453   460,159 
INTEREST EXPENSE:       
Deposits 5,389   10,762   27,109   57,862 
Advances from the FHLB 206   1,404   1,224   8,393 
Subordinated debt, net 2,962   2,962   11,816   11,847 
Repurchase agreements and other borrowings 154   241   935   1,913 
Total interest expense 8,711   15,369   41,084   80,015 
Net interest income 100,792   100,614   402,369   380,144 
PROVISION FOR CREDIT LOSSES (1,110)  1,617   (16,774)  67,177 
     Net interest income after provision for credit losses 101,902   98,997   419,143   312,967 
NONINTEREST INCOME:       
Residential mortgage banking income, net 20,945   37,504   109,304   112,166 
Insurance commissions and other title fees and income, net 15,486   13,868   67,541   65,840 
Property management income, net 9,099   5,665   42,175   26,473 
Real estate commission income, net 3,165   3,564   13,290   11,776 
Service charges on deposit accounts 2,479   1,707   9,584   8,021 
Credit card merchant fees, net 1,412   1,377   6,042   5,170 
BOLI 1,904   1,990   7,265   8,285 
Other income 5,142   5,559   21,508   36,826 
Net gain/(loss) on investment securities —   —   1,252   9,634 
Total noninterest income 59,632   71,234   277,961   284,191 
NONINTEREST EXPENSE:       
Salaries and employee benefits 64,814   61,475   245,844   235,676 
Occupancy expense 8,371   8,193   31,657   31,317 
Furniture and equipment 3,528   3,462   14,175   13,914 
Amortization - intangibles 2,935   2,797   11,127   11,498 
Software expense 4,014   4,066   16,911   14,622 
Data processing 3,524   2,363   13,779   10,985 
Professional fees 2,723   2,591   9,548   11,268 
Advertising and marketing 3,414   2,204   13,504   9,643 
Other expenses 17,144   18,781   60,727   56,902 
     Total noninterest expense 110,467   105,932   417,272   395,825 
Income before income tax expense and noncontrolling interest 51,067   64,299   279,832   201,333 
Provision for income tax expense 9,410   10,408   54,798   31,900 
Net income$41,657  $53,891  $225,034  $169,433 
Net income attributable to noncontrolling interest (1,474)  (3,809)  (9,651)  (23,898)
Net income attributable to TowneBank$40,183  $50,082  $215,383  $145,535 
        
Per common share information       
Basic earnings$0.55  $0.69  $2.97  $2.01 
Diluted earnings$0.55  $0.69  $2.97  $2.01 
Cash dividends declared$0.20  $0.18  $0.78  $0.72 


TOWNEBANK
Consolidated Balance Sheets - Five Quarter Trend
(dollars in thousands, except per share data)
 
          
 December 31, September 30, June 30, March 31, December 31,
  2021   2021   2021   2021   2020 
 (unaudited) (unaudited) (unaudited) (unaudited) (audited)
ASSETS         
Cash and due from banks$17,373  $75,370  $117,797  $141,545  $41,514 
Interest-bearing deposits at FRB - Richmond 3,244,484   3,155,039   2,970,490   1,936,458   1,795,241 
Interest-bearing deposits in financial institutions 34,779   33,506   31,971   30,031   27,532 
Total Cash and Cash Equivalents 3,296,636   3,263,915   3,120,258   2,108,034   1,864,287 
Securities available for sale, at fair value 1,806,183   1,560,402   1,454,421   1,418,006   1,368,224 
Securities held to maturity 154,221   14,898   15,389   15,980   16,512 
Less: allowance for credit losses (94)  (94)  (97)  (97)  (97)
Securities held to maturity, net of allowance for credit losses 154,127   14,804   15,292   15,883   16,415 
Other equity securities 6,759   6,621   6,395   6,355   6,492 
Federal Home Loan Bank stock 13,146   13,146   16,909   16,909   30,135 
Total Securities 1,980,215   1,594,973   1,493,017   1,457,153   1,421,266 
Mortgage loans held for sale 358,303   431,846   554,447   582,905   540,798 
Loans, net of unearned income and deferred costs 9,506,252   9,297,565   9,423,578   9,734,583   9,629,068 
Less: allowance for credit losses (106,059)  (107,177)  (108,130)  (116,077)  (120,157)
Net Loans 9,400,193   9,190,388   9,315,448   9,618,506   9,508,911 
Premises and equipment, net 270,772   270,810   265,644   261,831   260,242 
Goodwill 457,187   457,187   452,328   452,328   452,328 
Other intangible assets, net 50,379   50,839   42,271   44,808   45,533 
BOLI 251,805   249,862   249,213   247,655   246,109 
Other assets 295,897   301,552   311,209   306,176   286,970 
TOTAL ASSETS$16,361,387  $15,811,372  $15,803,835  $15,079,396  $14,626,444 
LIABILITIES AND EQUITY         
Deposits:         
Noninterest-bearing demand$5,546,665  $5,394,952  $5,243,074  $4,840,678  $4,374,566 
Interest-bearing:         
Demand and money market accounts 6,139,714   5,681,181   5,373,146   5,062,461   4,819,604 
Savings 371,356   366,165   349,552   342,554   330,091 
Certificates of deposit 1,515,891   1,571,752   1,998,828   1,893,951   2,048,905 
Total Deposits 13,573,626   13,014,050   12,964,600   12,139,644   11,573,166 
Advances from the FHLB 155,367   155,537   255,706   255,872   456,038 
Subordinated debt, net 249,652   249,503   249,353   249,204   249,055 
FRB PPP Lending Facility —   —   —   183,164   182,852 
Repurchase agreements and other borrowings 76,797   82,413   85,042   68,509   67,786 
Total Borrowings 481,816   487,453   590,101   756,749   955,731 
Other liabilities 389,771   409,435   379,278   366,697   313,719 
TOTAL LIABILITIES 14,445,213   13,910,938   13,933,979   13,263,090   12,842,616 
Preferred stock         
Authorized shares - 2,000,000 —   —   —   —   — 
Common stock, $1.667 par value 121,164   121,163   121,144   121,108   121,132 
Capital surplus 1,050,948   1,049,367   1,048,332   1,047,312   1,046,642 
Retained earnings 716,605   690,960   655,095   613,826   557,889 
Common stock issued to deferred compensation trust, at cost (18,257)  (18,076)  (18,076)  (17,063)  (16,969)
Deferred compensation trust 18,257   18,076   18,076   17,063   16,969 
Accumulated other comprehensive income (loss) 10,597   21,597   29,273   17,969   41,184 
TOTAL SHAREHOLDERS’ EQUITY 1,899,314   1,883,087   1,853,844   1,800,215   1,766,847 
Noncontrolling interest 16,860   17,347   16,012   16,091   16,981 
TOTAL EQUITY 1,916,174   1,900,434   1,869,856   1,816,306   1,783,828 
TOTAL LIABILITIES AND EQUITY$16,361,387  $15,811,372  $15,803,835  $15,079,396  $14,626,444 
                    


TOWNEBANK
Consolidated Statements of Income - Five Quarter Trend (unaudited)
(dollars in thousands, except per share data)
      
 Three Months Ended
 December 31, September 30, June 30, March 31, December 31,
  2021   2021   2021   2021   2020 
INTEREST INCOME:         
Loans, including fees$95,054  $98,258  $100,614  $101,396  $104,182 
Investment securities 10,484   7,000   6,871   7,117   7,499 
Interest-bearing deposits in financial institutions and
federal funds sold		 1,215   1,182   619   416   435 
Mortgage loans held for sale 2,750   3,405   3,711   3,361   3,867 
Total interest income 109,503   109,845   111,815   112,290   115,983 
INTEREST EXPENSE:         
Deposits 5,389   6,028   7,144   8,548   10,762 
Advances from the FHLB 206   247   274   497   1,404 
Subordinated debt 2,962   2,962   2,962   2,930   2,962 
Repurchase agreements and other borrowings 154   165   291   325   241 
Total interest expense 8,711   9,402   10,671   12,300   15,369 
Net interest income 100,792   100,443   101,144   99,990   100,614 
PROVISION FOR CREDIT LOSSES (1,110)  (1,582)  (10,055)  (4,027)  1,617 
Net interest income after provision for credit losses 101,902   102,025   111,199   104,017   98,997 
NONINTEREST INCOME:         
Residential mortgage banking income, net 20,945   25,422   25,524   37,412   37,504 
Insurance commissions and other title fees and income, net 15,486   17,398   18,331   16,325   13,868 
Property management income, net 9,099   10,502   7,091   15,483   5,665 
Real estate commission income, net 3,165   3,781   3,893   2,451   3,564 
Service charges on deposit accounts 2,479   2,524   2,391   2,190   1,707 
Credit card merchant fees, net 1,412   1,660   1,667   1,302   1,377 
BOLI 1,904   2,301   1,541   1,519   1,990 
Other income 5,142   6,045   5,487   4,837   5,559 
Net gain/(loss) on investment securities —   —   252   1,000   — 
     Total noninterest income 59,632   69,633   66,177   82,519   71,234 
NONINTEREST EXPENSE:         
Salaries and employee benefits 64,814   61,230   61,365   58,435   61,475 
Occupancy expense 8,371   7,656   7,559   8,072   8,193 
Furniture and equipment 3,528   3,513   3,622   3,512   3,462 
Amortization - intangibles 2,935   2,750   2,719   2,723   2,797 
Software expense 4,014   4,209   4,494   4,194   4,066 
Data processing 3,524   3,603   3,414   3,239   2,363 
Professional fees 2,723   2,227   2,259   2,339   2,591 
Advertising and marketing 3,414   3,865   3,257   2,968   2,204 
Other expenses 17,144   15,033   16,705   11,844   18,781 
     Total noninterest expense 110,467   104,086   105,394   97,326   105,932 
Income before income tax expense and noncontrolling interest 51,067   67,572   71,982   89,210   64,299 
Provision for income tax expense 9,410   14,829   13,980   16,579   10,408 
Net income 41,657   52,743   58,002   72,631   53,891 
Net income attributable to noncontrolling interest (1,474)  (2,343)  (2,199)  (3,636)  (3,809)
Net income attributable to TowneBank$40,183  $50,400  $55,803  $68,995  $50,082 
Per common share information         
Basic earnings$0.55  $0.70  $0.77  $0.95  $0.69 
Diluted earnings (1)$0.55  $0.69  $0.77  $0.95  $0.69 
Basic weighted average shares outstanding 72,525,504   72,506,877   72,468,094   72,414,953   72,357,177 
Diluted weighted average shares outstanding 72,624,610   72,591,281   72,560,234   72,517,008   72,455,096 
Cash dividends declared$0.20  $0.20  $0.20  $0.18  $0.18 

(1) The quarterly diluted EPS do not sum to the total year diluted EPS due to rounding.


TOWNEBANK
Banking Segment Financial Information
(dollars in thousands)
 
    
 Three Months Ended Year Ended Increase/(Decrease)
 December 31, September 30,
2021		 December 31, 2021 over 2020
  2021   2020    2021   2020  Amount Percent
Revenue             
Net interest income$98,345  $97,412  $97,668  $391,751  $367,353  $24,398  6.64%
Noninterest income             
Service charges on deposit accounts 2,479   1,707   2,524   9,584   8,021   1,563  19.49%
Credit card merchant fees 1,412   1,377   1,660   6,042   5,169   873  16.89%
Other income 4,876   5,983   6,334   21,584   21,809   (225) (1.03)%
Subtotal 8,767   9,067   10,518   37,210   34,999   2,211  6.32%
Gain (loss) on investment securities —     —   1,252   9,634   (8,382) n/m 
Total noninterest income 8,767   9,067   10,518   38,462   44,633   (6,171) (13.83)%
Total revenue 107,112   106,479   108,186   430,213   411,986   18,227  4.42%
              
Provision for credit losses (1,199)  1,628   (1,728)  (15,859)  65,799   (81,658) (124.10)%
              
Expenses             
Salaries and employee benefits 37,678   37,358   34,791   140,105   142,328   (2,223) (1.56)%
Occupancy expense 5,541   5,681   5,098   21,198   21,237   (39) (0.18)%
Furniture and equipment 2,570   2,625   2,602   10,657   10,425   232  2.23%
Amortization of intangible assets 812   1,013   862   3,549   4,354   (805) (18.49)%
Other expenses 19,484   19,892   16,580   68,504   65,107   3,397  5.22%
Total expenses 66,085   66,569   59,933   244,013   243,451   562  0.23%
Income before income tax, corporate allocation and noncontrolling interest 42,226   38,282   49,981   202,059   102,736   99,323  96.68%
Corporate allocation 1,260   643   1,241   5,041   2,534   2,507  98.93%
Income before income tax provision and noncontrolling interest 43,486   38,925   51,222   207,100   105,270   101,830  96.73%
Provision for income tax expense 7,123   5,163   10,225   37,584   14,467   23,117  159.79%
Net income 36,363   33,762   40,997   169,516   90,803   78,713  86.69%
Noncontrolling interest (3)  4   2   (4)  6   (10) n/m 
Net income attributable to TowneBank$36,360  $33,766  $40,999  $169,512  $90,809  $78,703  86.67%
              
Efficiency ratio (non-GAAP) 60.94%  61.57%  54.60%  56.06%  59.42%    


TOWNEBANK
Realty Segment Financial Information
(dollars in thousands)
 
    
 Three Months Ended Year Ended Increase/(Decrease)
 December 31, September 30,  December 31, 2021 over 2020
  2021   2020   2021   2021   2020  Amount Percent
Revenue             
Residential mortgage brokerage
income, net		$22,257  $38,040  $26,637  $113,155  $114,589  $(1,434) (1.25)%
Real estate brokerage income, net 3,165   3,564   3,781   13,290   11,776   1,514  12.86%
Title insurance and settlement fees 610   669   706   2,527   2,397   130  5.42%
Property management fees, net 9,099   5,665   10,502   42,175   26,473   15,702  59.31%
Income from unconsolidated
subsidiary		 113   398   269   1,077   1,336   (259) (19.39)%
Net interest and other income 3,010   3,627   3,154   12,232   13,889   (1,657) (11.93)%
Total revenue 38,254   51,963   45,049   184,456   170,460   13,996  8.21%
              
Provision for credit losses 89   (11)  146   (915)  1,378  $(2,293) n/m 
              
Expenses             
Salaries and employee benefits$17,682  $16,168  $17,375  $67,922  $58,263  $9,659  16.58%
Occupancy expense 1,957   1,869   1,926   7,689   7,465   224  3.00%
Furniture and equipment 727   614   693   2,661   2,622   39  1.49%
Amortization of intangible assets 931   658   702   2,813   2,630   183  6.96%
Other expenses 9,805   8,779   11,103   40,579   33,143   7,436  22.44%
Total expenses 31,102   28,088   31,799   121,664   104,123   17,541  16.85%
              
Income (loss) before income tax, corporate allocation, and noncontrolling interest 7,063   23,886   13,104   63,707   64,959   (1,252) (1.93)%
Corporate allocation (1,000)  (403)  (1,000)  (4,000)  (1,522)  (2,478) 162.81%
Income (loss) before income tax provision and noncontrolling interest 6,063   23,483   12,104   59,707   63,437   (3,730) (5.88)%
Provision for income tax 1,894   4,421   3,546   13,911   12,035   1,876  15.59%
Net income (loss) 4,169   19,062   8,558   45,796   51,402   (5,606) (10.91)%
Noncontrolling interest (1,471)  (3,813)  (2,345)  (9,647)  (11,809)  2,162  (18.31)%
Net income (loss) attributable to TowneBank$2,698  $15,249  $6,213  $36,149  $39,593  $(3,444) (8.70)%
              
Efficiency ratio (non-GAAP) 78.87%  52.79%  69.03%  64.43%  59.54%    


TOWNEBANK
Insurance Segment Financial Information
(dollars in thousands)
 
              
 Three Months Ended Year Ended Increase/(Decrease)
 December 31, September 30, December 31, 2021 over 2020
  2021   2020   2021   2021   2020  Amount Percent
Commission and fee income             
Property and casualty$13,135  $11,942  $15,338  $57,603  $52,726  $4,877  9.25%
Employee benefits 3,682   3,725   3,820   14,817   15,259   (442) (2.90)%
Travel insurance (1) —   —   —   —   3,526   (3,526) (100.00)%
Specialized benefit services 172   175   164   666   664   2  0.30%
Total commissions and fees 16,989   15,842   19,322   73,086   72,175   911  1.26%
Contingency and bonus revenue 2,231   1,087   1,664   8,977   6,230   2,747  44.09%
Other income (1) 40   69   40   196   17,976   (17,780) (98.91 )%
Total revenue 19,260   16,998   21,026   82,259   96,381   (14,122) (14.65)%
Employee commission expense 4,202   3,592   4,185   16,598   14,492   2,106  14.53%
Revenue, net of commission expense 15,058   13,406   16,841   65,661   81,889   (16,228) (19.82)%
              
Expenses             
Salaries and employee benefits$9,454  $7,949  $9,064  $37,817  $35,085  $2,732  7.79%
Occupancy expense 873   643   632   2,770   2,615   155  5.93%
Furniture and equipment 231   223   218   857   867   (10) (1.15)%
Amortization of intangible assets 1,192   1,126   1,186   4,765   4,514   251  5.56%
Other expenses 1,530   1,334   1,254   5,386   5,170   216  4.18%
Total operating expenses 13,280   11,275   12,354   51,595   48,251   3,344  6.93%
Income before income tax and noncontrolling interest 1,778   2,131   4,487   14,066   33,638   (19,572) (58.18)%
Corporate allocation (260)  (240)  (241)  (1,041)  (1,012)  (29) 2.87%
Income before income tax provision and noncontrolling interest 1,518   1,891   4,246   13,025   32,626   (19,601) (60.08)%
Provision for income tax expense 393   824   1,058   3,303   5,398   (2,095) (38.81)%
Net income 1,125   1,067   3,188   9,722   27,228   (17,506) (64.29)%
Noncontrolling interest (1) —   —   —   —   (12,095)  12,095  (100.00)%
Net income attributable to TowneBank$1,125  $1,067  $3,188  $9,722  $15,133  $(5,411) (35.76)%
              
Provision for income taxes 393   824   1,058   3,303   5,398   (2,095) (38.81)%
Depreciation, amortization and interest expense 1,342   1,274   1,330   5,341   5,151   190  3.69%
EBITDA (non-GAAP)$2,860  $3,165  $5,576  $18,366  $25,682  $(7,316) (28.49)%
              
Efficiency ratio (non-GAAP) 80.28%  75.70%  66.31%  71.32%  68.06%    
(1) In third quarter 2020, we sold Red Sky Insurance, our travel insurance joint venture. We recorded a gross gain on sale in other income of $17,626. Our re-tax net gain, after distributions to noncontrolling interest was $6,521.


TOWNEBANK
Reconciliation of Non-GAAP Financial Measures:
       
        
 Three Months Ended Twelve Months Ended
 December 31, September 30, December 31, December 31,
  2021   2021   2020   2021   2020 
          
Return on average assets (GAAP) 0.99%  1.27%  1.35%  1.40%  1.03%
Impact of excluding average goodwill and other intangibles and amortization 0.09%  0.10%  0.11%  0.11%  0.10%
Return on average tangible assets (non-GAAP) 1.08%  1.37%  1.46%  1.51%  1.13%
          
Return on average equity (GAAP) 8.38%  10.59%  11.26%  11.61%  8.46%
Impact of excluding average goodwill and other intangibles and amortization 3.70%  4.50%  5.02%  4.94%  4.16%
Return on average tangible equity (non-GAAP) 12.08%  15.09%  16.28%  16.55%  12.62%
          
Return on average common equity (GAAP) 8.45%  10.68%  11.36%  11.70%  8.52%
Impact of excluding average goodwill and other intangibles and amortization 3.77%  4.59%  5.12%  5.05%  4.24%
Return on average tangible common equity (non-GAAP) 12.22%  15.27%  16.48%  16.75%  12.76%
          
Book value (GAAP)$26.13  $25.91  $24.31  $26.13  $24.31 
Impact of excluding average goodwill and other intangibles and amortization (6.98)  (6.99)  (6.85)  (6.98)  (6.85)
Tangible book value (non-GAAP)$19.15  $18.92  $17.46  $19.15   17.46 
          
Efficiency ratio (GAAP) 68.86%  61.20%  61.64%  61.33%  59.58%
Impact of excluding gain/(loss) on investments and amortization expense        (1.83)%        (1.62)%  (1.62)%         (1.52))%  0.75%
Efficiency ratio (non-GAAP) 67.03%  59.58%  60.02%  59.81%  60.33%
          
Average assets (GAAP)$16,075,509  $15,706,998  $14,722,385  $15,384,662  $14,172,206 
Less: average goodwill and intangible assets 506,867   506,231   491,453   501,689   495,707 
Average tangible assets (non-GAAP)$15,568,642  $15,200,767  $14,230,932  $14,882,973  $13,676,499 
          
Average equity (GAAP)$1,902,474  $1,888,451  $1,768,906  $1,855,948  $1,721,059 
Less: average goodwill and intangible assets 506,867   506,231   491,453   501,689   495,707 
Average tangible equity (non-GAAP)$1,395,607  $1,382,220  $1,277,453  $1,354,259  $1,225,352 
          
Average common equity (GAAP)$1,886,279  $1,871,820  $1,753,596  $1,840,261  $1,707,635 
Less: average goodwill and intangible assets 506,867   506,231   491,453   501,689   495,707 
Average tangible common equity (non-GAAP)$1,379,412  $1,365,589  $1,262,143  $1,338,572  $1,211,928 
          
Net income (GAAP)$40,183  $50,400  $50,082  $215,383  $145,535 
Amortization of intangibles, net of tax 2,318   2,172   2,210   8,790   9,086 
Tangible net income (non-GAAP)$42,501  $52,572  $52,292  $224,173  $154,621 
          
Net income (GAAP)$40,183  $50,400  $50,082  $215,383  $145,535 
Provision for credit losses (1,110)  (1,582)  1,617   (16,774)  67,177 
Provision for income taxes 9,410   14,829   10,408   54,798   31,900 
(Gain)/loss on equity investment net of noncontrolling interest —   —  $—   30   (17,626)
Pre-provision, pre-tax net revenues (non-GAAP)$48,483  $63,647  $62,107  $253,437  $226,986 
          
Total revenue (GAAP)$160,424  $170,076  $171,848  $680,331  $664,335 
Net (gain) loss on investment securities —   —   —   (1,252)  (9,634)
Net (gain) loss on equity investment —   —   —   30   (17,626)
Total revenue for efficiency calculation (non-GAAP)$160,424  $170,076  $171,848  $679,109  $637,075 
          
Noninterest expense (GAAP)$110,467  $104,086  $105,932  $417,272  $395,825 
Less: Amortization of intangibles 2,935   2,750   2,797   11,127   11,498 
Noninterest expense net of amortization (non-GAAP)$107,532  $101,336  $103,135  $406,145  $384,327 

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Source: TowneBank

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